UAE salaries to decrease in real terms this year

Salaries in the UAE are not expected to keep pace with inflation this year following the introduction of a 5 per cent value added tax rate, according to Korn Ferry Hay Group.

The human resources consultancy said wages across the Middle East were expected to increase 3.8 per cent this year from 4.5 per cent last year

However, inflation adjusted wage increases are expected to be as little as 0.9 per cent compared to 2.5 per cent in 2017.

In the UAE, the firm said expected inflation of 4.6 per cent would offset pay increases of 4.1 per cent, meaning real wages would actually fall by 0.5 per cent.

Similarly in Saudi Arabia, salaries were expected to increase 3.2 per cent this year, barely ahead of the 3.1 per cent inflation rate, meaning a real wage increase of just 0.1 per cent.

Salaries in the kingdom increased 5 per cent last year, but 0.8 per cent in real wage terms, according to the firm.

“Employers in Saudi and UAE are bracing for a challenging time as they battle with managing business costs and meeting the expectations of disgruntled employees,” Korn Ferry Hay Group said.

The introduction of VAT is placing additional pressure on businesses as they seek to ensure they are compliant with the law, while the costs of everyday goods like food, fuel and utilities are increasing for consumers.